The “Doc Fix:” Old and New Coke

In this Jan. 12, 2005 file photo, a technician operates a General Electric MRI machine at a private clinic in Calgary, Alberta. A fee for service payment system encourages more procedures.

In this Jan. 12, 2005 file photo, a technician operates a General...

The "Doc Fix" may not be what you think it is; the term has become synonymous with a change in how doctors are paid. On April 14, Congress approved a new way to pay doctors in the Medicare system.

Why is change needed? Most doctors are paid through a "fee-for-service" system: every time a doctor sees a patient, interprets a test or performs an operation, the doctor is paid for that service. It is human nature, whether with doctors treating patients or police officers issuing parking tickets, to perform more services in such an arrangement.

Congress recognized the issue long ago, and in the Balanced Budget Act of 1997, legislators imposed a cap on the total amount paid to physicians by Medicare – in the aggregate, not to individual doctors – at $40.2 billion that year. Then, by a formula, this cap was increased (or decreased) yearly. This change in the annual amount paid to physicians became known as the "Sustainable Growth Rate," or SGR. The SGR was based on a number of factors, including the actual change in fees by physicians, the Gross Domestic Product and the number of Medicare beneficiaries. If the change in spending the year before exceeded the projected SGR, the amount paid to physicians in the next year would decrease. There was no method for a review – what if the formula was wrong?

What happened? Every year, we doctors exceeded the amount available and the formula indicated the amount paid to physicians needed to be decreased. Either the doctors did too much or the formula was wrong. Probably some of both – but interestingly, from the late 1990's on, everyone, including Congress, agreed the formula was wrong and failed to predict the increased use of services needed by an aging population.

So why not just fix it? Since more money was required, Congress needed to find the money – or decrease the amount paid to physicians. Every year, when the Medicare budget has been under review, the doctors lobby to be sure the amount paid does not decrease. This lobbying has become a necessary evil. Since no one knows what would happen without the extensive lobbying, it continues. The lobbying is absurdly expensive; in fact, the SGR change (or "fix") has become one of the top issues for physician groups. According to McClatchy DC, the American Medical Association spent $19.7 million last year on lobbying and contributed $1.7 million to favorable candidates; the American College of Radiology spent more than $5.5 million. Do the math – there are perhaps more than 200 different physician groups pumping well over $1 billion every year into the pockets of lobbyists. One might wonder if the lobbyists are perfectly happy to see this issue continue. Imagine if all that money were spent helping to fund the "fix!" I am not happy to see it continue – it must be fixed.

But every year to date, Congress has "kicked the can down the road" because members can't find the money (around $210 billion over 10 years) and surely don't want to exercise the other option – decreasing physician payments by 21 percent.

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Prognosis

So it is a big deal that Congress created "the Doc Fix." Under one provision, instead of a massive decrease in fees, physicians will receive a .5 percent increase for each of the next five years. Imagine if Congress in 1997 had said it would increase fees by about one-sixth the rate of inflation for five years. But now that physicians are faced with a huge reduction or a paltry increase, they are OK with the increase. Remember Old Coke and New Coke? We didn't realize how wonderful Old Coke was until we faced the alternative.

Garson, an occasional contributor to Prognosis, is director of the Texas Medical Center's Health Policy Institute.